How the figure is calculated
Add the outstanding mortgage, any other secured borrowing and the new loan including any fees added to it, then divide by the property's value and multiply by 100. On a £250,000 home with a £150,000 mortgage, a £50,000 loan gives a combined LTV of 80%. A £62,500 loan would give 85%.
The value used is the lender's, not your estimate. A lower valuation raises the LTV and can reduce what is available. Our equity guide works through the arithmetic.
Why fewer lenders lend at higher LTVs
The lender's security is the equity above the mortgage. At higher LTVs that margin is thinner, so fewer lenders participate and the interest rate offered is often higher than at lower LTVs. Credit history, income and property type are weighed more heavily too.
Passing an LTV limit does not mean approval. Affordability is assessed on income and spending, and a lender can decline within its published limits.
What changes for you
A higher LTV means a larger debt against the home, a higher total interest cost and less cushion if the property's value falls. If you needed to sell, both loans must be cleared from the proceeds; with little equity, a fall in price can leave a shortfall.
Ask the broker to show the loan at the amount you need and at a smaller amount, so you can see what a lower LTV would save.
Before you commit
- Get the combined LTV from the lender's valuation, not an estimate.
- Compare the rate and total cost at a lower borrowing amount.
- Check affordability if a variable rate rose by one or two points.
- Consider what equity you would want left if you had to sell.